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Global solar PV market set for spectacular growth over next 5 years – IEA report

The installation of solar photovoltaic (PV) systems on homes, commercial buildings and industrial facilities is set to take off over the next five years, transforming the way electricity is generated and consumed, according to the International Energy Agency’s (IEA) latest renewable energy market forecast. Released on October 21, 2019, the "Renewables 2019" report also sees an expansion of "vastly underexploited" renewable heat and a 25% growth in biofuels with China being the main driver.

China is forecast to account for almost 50% of global distributed PV growth, overtaking the EU to become the world leader in installed capacity already in 2021. Nevertheless, distributed PV expansion still picks up significantly in the EU during 2019-24 as the technology becomes more economically attractive and the policy environment improves. While Japan remains a strong market, India and Korea emerge as Asian drivers of growth. Distributed solar PV expansion in North America is twice as rapid between 2019 and 2024 as it was between 2013 and 2018, mainly driven by the US (graphic courtesy IEA).

China is forecast to account for almost 50% of global distributed PV growth, overtaking the EU to become the world leader in installed capacity already in 2021. Nevertheless, distributed PV expansion still picks up significantly in the EU during 2019-24 as the technology becomes more economically attractive and the policy environment improves. While Japan remains a strong market, India and Korea emerge as Asian drivers of growth. Distributed solar PV expansion in North America is twice as rapid between 2019 and 2024 as it was between 2013 and 2018, mainly driven by the US (graphic courtesy IEA).

The report “Renewables 2019” forecasts that the world’s total renewable-based power capacity will grow by 50 percent between 2019 and 2024. This increase of 1 200 gigawatts – equivalent to the current total power capacity of the United States – is driven by cost reductions and concerted government policy efforts.

Solar PV accounts for 60 percent of the rise. The share of renewables in global power generation is set to rise from 26 percent today to 30 percent in 2024. The expected growth comes after renewable capacity additions stalled last year for the first time in almost two decades. However, the report notes that the renewed expansion remains well below what is needed to meet global sustainable energy targets.

Renewables are already the world’s second-largest source of electricity, but their deployment still needs to accelerate if we are to achieve long-term climate, air quality, and energy access goals, said Dr Fatih Birol, the IEA’s Executive Director.

Three challenges for renewable deployment

The report highlights the three main challenges that need to be overcome to speed up the deployment of renewables: policy and regulatory uncertainty, high investment risks and system integration of wind and solar PV.

Distributed PV accounts for almost half of the growth in the overall solar PV market through 2024. Contrary to conventional wisdom, commercial and industrial applications rather than residential uses dominate distributed PV growth, accounting for three-quarters of new installations over the next five years.

This is because economies of scale combined with better alignment of PV supply and electricity demand enable more self-consumption and bigger savings on electricity bills in the commercial and industrial sectors.

Still, the number of solar rooftop systems on homes is set to more than double to some 100 million by 2024, with the top markets on a per capita basis that year forecast to be Australia, Belgium, California, the Netherlands, and Austria.

As costs continue to fall, we have a growing incentive to ramp up the deployment of solar PV, said Dr Birol.

The cost of generating electricity from distributed solar PV systems is already below retail electricity prices in most countries. The IEA forecasts that these costs will decline by a further 15 percent to 35 percent by 2024, making the technology more attractive and spurring adoption worldwide.

The report warns, however, that important policy and tariff reforms are needed to ensure distributed PV’s growth is sustainable. Unmanaged growth could disrupt electricity markets by raising system costs, challenging the grid integration of renewables and reducing the revenues of network operators.

By reforming retail tariffs and adapting policies, utilities and governments can attract investment in distributed PV while also securing enough revenues to pay for fixed network assets and ensuring that the cost burden is allocated fairly among all consumers.

Distributed PV’s potential is breathtaking, but its development needs to be well managed to balance the different interests of PV system owners, other consumers, and energy and distribution companies. The IEA is ready to advise governments on what is needed to take full advantage of this rapidly emerging technology without jeopardising electricity security, Dr Birol said.

According to the report’s Accelerated Case, improving economics, policy support, and more effective regulation could push distributed PV’s global installed capacity above 600 GW by 2024, almost double Japan’s total power capacity today. Yet this accelerated growth is still only 6 percent of distributed PV’s technical potential based on the total available rooftop area.

Renewable heat set to expand

As in previous years, Renewables 2019 also offers forecasts for all sources of renewable energy. Buildings account for over half of global renewable heat growth, followed by industry. Renewable heat is set to expand by one-fifth between 2019 and 2024.

China, the European Union (EU), India, and the United States (US) are responsible for two-thirds of the global increase in renewable heat consumption over the forecast period. However, renewables’ share of global heat consumption increases only marginally, from 10 percent today to 12 percent in 2024.

The heat and power sectors become increasingly interconnected as renewable electricity used for heat rises by more than 40 percent. But overall, the report finds that “renewable heat potential remains vastly underexploited” and deployment is not in line with global climate targets, calling for greater ambition and stronger policy support.

Renewable electricity used for heat is forecast to rise by more than 40%, a similar increase to that of bioenergy, accounting for one-fifth of global renewable heat consumption by 2024. This growth results mainly from a rising share of renewables in electricity generation and, to a lesser extent, greater electrification of end uses. Modern bioenergy remains by far the largest source of renewable heat by 2024. More than two-thirds of bioenergy growth is forecast to occur in the industry sector, mostly in India, China and the EU (graphic courtesy IEA).

China to drive biofuels

Biofuels currently represent some 90 percent of renewable energy in transport and their use is set to increase by 25 percent over the next five years. Growth is dominated by Asia, particularly China, and is driven by energy security and air pollution concerns.

In 2018, production grew at its fastest pace for five years, propelled by a surge in Brazil’s ethanol output. Overall, Asia accounts for half of the growth, as its ambitious biofuel mandates aimed at reinforcing energy security boost demand for agricultural commodities and improve air quality. In addition to biofuels, renewable electricity provides around 10 percent of renewable energy in transport by 2024, most of which is in China.

Bolstered by the rollout of 10 percent ethanol blending in a growing number of provinces and increasing investments in production capacity, China is set to see a tripling of ethanol production by 2024. Brazil registers the second-largest growth, boosted by the introduction of the RenovaBio programme in 2020. The US and Brazil still provide two-thirds of total biofuel production in 2024.

Despite the rapid expansion of electric vehicles, renewable electricity only accounts for one-tenth of renewable energy consumption in transport in 2024. And the share of renewables in total transport fuel demand still remains below 5 percent.

The Accelerated Case sees renewables in transport growing by an additional 20 percent through 2024 on the assumption of higher quota levels and enhanced policy support that opens new markets in aviation and marine transport.

Total biofuel output is forecast to increase by 25% by 2024. In 2018, production grew at its fastest pace for five years, propelled by a surge in Brazil’s ethanol output. Overall, Asia accounts for half of the growth, as its ambitious biofuel mandates aimed at reinforcing energy security boost demand for agricultural commodities and improve air quality. China is set to have the largest biofuel production growth in any country. The 10% ethanol blending rollout and increasing investments in production capacity drive a tripling of ethanol production by 2024 (graphic courtesy IEA).

Total biofuel output is forecast to increase by 25% by 2024. In 2018, production grew at its fastest pace for five years, propelled by a surge in Brazil’s ethanol output. Overall, Asia accounts for half of the growth, as its ambitious biofuel mandates aimed at reinforcing energy security boost demand for agricultural commodities and improve air quality. China is set to have the largest biofuel production growth in any country. The 10% ethanol blending rollout and increasing investments in production capacity drive a tripling of ethanol production by 2024 (graphic courtesy IEA).

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